Wharton School cum laude and Founder and Co-Chief Investment Officer of Pzena Investment Management LLCÂ Richard Pzena (Trades, Portfolio) believes in investing in good businesses –Â but only when they go on sale.
In fact, his firm has five guidelines it follows when looking at which stocks it wants to add to the portfolio:
- A low price relative to the company's normal earning power
- Current earnings below normal
- Managment has a sound plan for earnings recovery.
- The business has a history of earning attractive long-term returns.
- There is tangible downside protection.
"Building a portfolio exclusively focused on companies with these characteristics should generate excess returns for long-term investors."
Pzena added four new stocks to his portfolio of 141, valued at $18.71 billion with a quarter over quarter turnover rate of 8%.
Baxter International Inc (BAX, Financial)
Baxter consists of 1.5% of Pzena's overall portfolio, with 3,944,140 shares valued at $289.1 million.
Baxter International was incorporated in Delaware in 1931 as a healthcare company engaged in the development, manufacturing and sale of products that assist people with immune diseases, kidney failure, trauma, infectious diseases and other chronic and acute medical conditions.
The stock is currently trading at $70.97/share.
The company's current ROE is 21.94%, which is ranked higher than 98% of the companies in the Global Medical Instruments and Supplies industry.
Baxter's ROA is currently 7.31%, ranking it higher than 93% of the companies within the same industry and above the industry's median of 3.2%.
The company's dividend yield is 2.90%, which is close to the 10-year high of 1.72. Shareholders received a payout of $0.52/share on January 2 this year, a 6.12% increase from the previous year's payout of $0.49/share.
Ford Motor is 1.2% of Pzena's overall portfolio and 0.39% of the company's shares outstanding, with 15,053.,523 shares valued at $233.3 million.
Ford was incorporated in Delaware in 1919 as a producer of trucks and cars. The company also finances vehicles.
The stock is currently trading at $15.81/share.
Ford's ROE is currently at 12.62%, ranking it higher than 85% of the companies in the Global Auto Manufacturers industry. The company's ROA is 1.59%, ranking it higher than 57% of the companies in the industry, although it is below the industry median of 4.7%.
Ford's dividend yeild is 3.31%, which is close to the five-year high. The next expected pay date is on March 2, in which shareholders will receive $0.15/share, which is roughly a 15% increase from the $0.13/share shareholders received from the previous year.
Stanley Black & Decker Inc (SWK, Financial)
Stanley Black makes up 1.1% of Pzena's overall portfolio and 1.41% of the company's overall shares outstanding, with 2,209,389 shares valued at $212.3 million.
Stanley Black was incorporated in 1852 in Connecticut as a provider of power and hand tools, products and services for differrent industrial applications, mechanical access solutions and electronic security and monitoring systems.
The stock is currently trading at $96.49/share.
Stanley Black's ROE is currently 13.51%, higher than the industry's median of 7.7% and ranked higher than 82% of the companies in the Global Tools and Accessories industry. The company's ROA is 5.62%, which is higher than the industry median of 3.8% and ranked higher than 78% of the companies in the industry.
The dividend yield is 2.12% and investors should be cautious of the fact that it is close to the three-year low. Shareholders were paid $0.52/share on December 16, a 4% increase from the previous year's payout of $0.50/share.
Pfizer consists of 0.36% of Pzena's overall portfolio and 0.03% of the company's shares outstanding. Pzena currently owns 2,170,568 shares, valued at $67.6 million.
Pfizer was incorporated in 1942 as a research-based, biopharmaceuitcal company that helps people extend and improve their lives by developing, discovering and manufacturing healthcare products.
The stock is currently trading at $33.23/share.
The company's current ROE is 13.79%, which ranks it higher than 88% of the companies in the Global Drug Manufacturers industry and higher than the industry's median of 6.6%. The ROA is currently 6.20%, which is higher than the industry median of 4%.
The current dividend yield is 3.20% and investors should be cautious of the fact that the dividend yield is close to the 5-year low. Shareholders are expected to receive payout on March 3 of $0.28/share, which is 7.7% more than last year's payout of $0.26/share.
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